10-06-2017

LNG supply to Asia unimpacted by Qatar crisis

LNG

MIDF Amanah Investment Bank Bhd (MIDF Research) expects supply of liquefied natural gas (LNG) to Asia to remain the same in spite of political tensions surrounding oil producer Qatar.

Earlier this week, Saudi Arabia together with the United Arab Emirates, Bahrain, Yemen and Egypt decided to cut diplomatic ties with Qatar over its alleged support for Iran and Islamist groups.

Transport links to and from Qatar via land, air and sea have also been suspended. Even worse, the export of white sugar to Qatar from the UAE and Saudi Arabia has been stopped, pressuring consumers in times where demand for sugar is high during the fasting month of Ramadhan.

“It is important to note that Qatar is one of the biggest producer of LNG in the world, producing 30 per cent of world’s supply at 79.6MT in 2016 according to the International Group of Liquefied Natural Gas Importers.

“Its port of Ras Laffan is home to the world’s biggest liquefied natural gas complex, exporting 75m tons per year of cold-chilled methane in giant tankers. Qatar also exports several million barrels per day of oil and natural gas liquids.

Japan and Korea are Qatar’s top LNG export destinations. Branching out from the Middle East, Qatar’s top export destinations for LNG are mainly Japan and Korea.

Exports to both countries in 2016 each exceeded 16b cubic metres. Assuming that Saudi and UAE waters does bar Qatari ships from navigating through its waters, Qatari ships still can sail through Iranian waters followed by the Strait of Hormuz via the usual shipping lane in the Omani territory.

Even in a worst case scenario if Oman were to join the boycott against Qatar, Qatar ships can alternatively remain sailing through the Iranian sector until reaching waters of Pakistan and India. Henceforth, Qatar’s LNG exports to the Asian region will not be affected.

However, there is still a downside risk if the Arab nations plot to stop Qatari exports from entering other regions especially Asia. With Japan and Korea being the biggest customers of Qatar’s LNG, such blockade of exports will definitely affect the LNG supply in these countries.

Comparing between Japan and Korea’s dependence on Qatar’s LNG, Korea is at higher risk if a supply disruption were to occur. The reason being is that the bulk of Korea’s LNG imports comes from Qatar that makes up 36 per cent of total LNG imports compared to Japan which has Qatar as its third largest LNG importer at 14 per cent of total LNG imports.

KOGAS to be badly affected if LNG supply affected. Moreover, Japan’s acquisition of Qatari LNG imports is spread over eight buyers as opposed to Korea having one only, which is KOGAS. Therefore, the fact that Qatar contributes the most to Korea’s total LNG imports while having only KOGAS as a buyer, poses a big risk in the event of a supply disruption from the diplomatic feud.

KOGAS even has one of the largest volume of LNG sourced from Qatar via long term contracts state producer, Qatargas.

Source: Borneo Post

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